Chapter 11 Flashcards
(26 cards)
What is Decision Making?
Decision Making is the process of developing a commitment (incl.resources) to some course of action(Involve making a choice among several action alternatives)
Decision making can also be described as a process of problem-solving.
When does a problem exists in decision making?
When there is a gap perceived btw some existing state and some desired state
What is a Well-Structured Problems?
has a clear existing and desired state- The Path to get from one state to the other is obvious. Problems are considered simple. Solutions are repetitive & familiar (can be programmed) as they arouse little controversy.
What is the Program?
Programs are only as good as….
It’s a standardized way of solving a problem. They short circuit decision-making process enabling decision-making to go directly from problem identity to solution.
Programs are only as good as the decision-making process that led to the adoption of the progam in the first place- ‘‘Garbage in will result in garbage out’’
what are Ill-structured problems
what are Ill-structured problems
- An ill-structured problem has unclear existing and desired states and unknown path of getting to the desired state
- Problems are unique and unusual and have not been encountered
- Frequently arouse controversy and/or conflict and cannot be solved with programmed decisions
- Decision-makers must resort to non-programmed decision making
- They can entail high risk and stimulate strong political considerations
Rational Decision-making process
A Rational decision-maker may use a model that involves a sequence of steps that are followed when making a decision
Perfect rationality
Perfect rationality is a
economic person is
Only one criterion for decision making:
These perfectly rational characteristics do …
Perfect rationality
Perfect rationality is a decision strategy that is completely informed, perfectly logical and oriented toward economic gain
economic person is perfect, cool, calculated can gather information without cost and is completely informed
Only one criterion for decision making: economic gain
These perfectly rational characteristics do not exist in real decision-makers
Bounded Rationality:
Herbert simon recognized that …
Suggested managers use…
Bounded rationality is …
… illustrate the operations for bounded rationality nad does the …
Bounded Rationality:
Herbert simon recognized that rational characteristics of economic person do not exist in real decision-makers
Suggested managers use bounded rationality rather than perfect rationality
Bounded rationality is a decision strategy that relies on limited info reflecting time constraints and political considerations that act as bounds to rationality
Framing and cognitive biases illustrate the operations for bounded rationality ad does the impact of the emotions and mood of decision
Framing:
- … can have a powerful impact on …
Cognitive biases :
- They constitute…, but they …
Framing: an aspect of the presentation of info about a problem that are assumed by decision markers
- how problems and decision alternatives are framed can have a powerful impact on resulting decisions
Cognitive biases are tendencies to acquire and process info in a particular way that is prone to error
- They constitute assumptions and shortcuts that can improve decision making efficiency, but they frequently lead to serious errors in judgment
Bounded rationality can lead to the following difficulties in problem identification:
When problem is identified , …
- ex: …
Different desision frames can lead to …
rational decisions makers should be …
Bounded rationality can lead to the following difficulties in problem identification:
- Perceptual defense
- Problem defined int terms of functional speciality
- Problem defined in terms of solutions
- Problem diagnosed in terms of symptoms
When problem is identified , it is framed in some way
- ex: a 50k expenditure can be framed as an expense or an investment
Different desision frames can lead to very different decisions
rational decisions makers should be very self-conscious about how they have framed problems
Information Search
Perfectly rational decisions makers have…
Bounded rationality suggests …
Decisions makers can have …
Too little information: ..
too much info: …
Confirmation bias refers to tendency to…
People have a cognitive bias to…
Information Search
Perfectly rational decsions makers has free and instantaneous access ot all info necessary to clarify the problem and develop alternative solutions
Bounded rationality suggests info search can be slow/costly
Decisions makers can have too little or too much info
Too little information: several cognitive biases contribute to this such as using whatever info is most readily avaible& the tendency to be overconfident which is exacerbated by confirmation bias
too much info: can damage the quality of decisions(information overload)
Confirmation bias refers to tendency to seek out info that conforms to ones own definition of or solution to a problem
People have a cognitive bias to value advice for which they have paid over free advice of equal quality
Alternative development, evaluation and choice
Rational decision maker exhibits …
Decision-maker working under bounded rationality- all of the…
… also come into play- it is possible to …
Large sample …
Anchoring effect illustrates …
satisficing: means that the …
Alternative development, evaluation and choice
Rational decision maker exhibits maximization- select alternative with the greatest expected value
Decision-maker working under bounded rationality- all of the alternative solutions and probabilities of success are not all known
cognitive biases also come into play- it is possible to reduce some of these cognitive biases by making people more accountable for their decisions
Large sample warrant more confidence than small samples
Anchoring effect illustrates decision-makers do not adjust their estimates enough from an initial estimate that serves as an anchor
satisficing: means that the decision-maker establishes an adequate level of acceptability for a solution to a problem and then screens solutions until he or she finds one that exceeds this level
Risky Business
When people view a problem as a …
it is important to be aware of …
framing a problem as a …
learning history can …
Risky Business
- When people view a problem as a choice between losses they tend to make risky decisions
- it is important to be aware of what reference point you are using when frame decisions alternatives
- framing a problem as a choice between losses can contribute to a foolish level of risk-taking
- learning history can modify these general preferences for or against risk
*
Solution implementation and evaluation
decision often dependent on ..
…during the decision-making process can help …
solution evaluation
- perfectly rational decision-maker should be able to …
- The bounded decision might…
- justification:…
- hindsight is the t….
sunk costs: …
Solution implementation and evaluation
decision often dependent on others to implement their decisions-implementation problems often occur when implementers are not decision markers
Cross-functional teams during the decision-making process can help prevent these kinds of implementation problems
solution evaluation
- perfectly rational decision-maker should be able to evaluate the effectiveness of a decision with calm objective detachment
- The bounded decision might encounter problems at this stage of the process
- justification: the decision-maker may devote his time and energy to justify a faulty decision
- hindsight is the tendency to review the decision-making process to find what was done right or wrong
sunk costs: permanent losses of resources incurred as a result of a decision
Escalation of commitment
refers to the …
reasons for the escalation of commitment:
- …
Escalation of commitment
refers to the tendency to invest additional resources in an apparently failing course of action
reasons for the escalation of commitment:
- Dissonance reduction
- social norm for consistent behavior
- motivation to not appear wasteful
- the way the problem is framed
- personality moods and emotions
Preventing escalation of commitment
Preventing escalation of commitment
encourage continuous experimentation with reframing the problem
set specific goals for the project in advance that must be met if more resources are to be invested
place more emphasis in evaluating managers on how they made decisions and less on decision outcomes
separate initial and subsequent decision making
How emotion and mood affect decision making
emotions can …
mood affects…(…)
research on mood and decision making reveals that
- people…
- people …
How emotion and mood affect decision making
emotions can help decision making but strong emotions can be a hindrance
mood affects what and how people think when making decisions(has greatest impact on uncertain, ambiguous decisions of the type that are especially crucial for orgs)
research on mood and decision making reveals that
- people in a positive mood tend to remember positive info and vise vera
- people in a positive mood tend to evaluate objects, people and events more positively and vice versa
Group decision making
Many orgs decisions are made …
number of reasons for using groups to make orgs decisions
- decision quality
- decision acceptance and commitment
- diffusion of responsibility
Group decision making
Many orgs decisions are made by groups, especially when problems are ill-structured
number of reasons for using groups to make orgs decisions
- decision quality
- decision acceptance and commitment
- diffusion of responsibility
Disadvantages of group decision making
- …
- …
- ….
- …
Disadvantages of group decision making
- time: efficiency decreases with group size
- conflict: potential for political wrangling and infighting
- Domination: occurs when meeting is dominated by one or a few dominant indv
- groupthink: capacity for group pressure to damage the mental efficiency, reality testing and moral judgment of decision-making groups. Unanimous acceptance of decisions is stressed over quality of decisions
Causes of groupthink
Causes of groupthink
- High group cohesiveness
- strong identification with the group
- concern for approval from the group
- isolation of the group from other sources of information
- the promotion of a particular decision by the group leader
Groupthink symptoms
Groupthink symptoms
Illusion of invulnerability: members are overconfident and willing to assume great risks. they ignore obvious danger signals
rationalization: problems and counterarguments that members cannot ignore are rationalized away
illusion of morality: the decisions the group adopt are not only perceived as sensible they are also perceived as morally correct
stereotypes of outsiders: the group constructs unfavorable stereotypes of group outsiders who are the targets of their decisions
pressure for conformity: members pressure each other to fall inline
self-censorship: members convince themselves to avoid voicing opinions contrary to the group
illusion of unanimity: members perceive that unanimous support exists for their chosen course of action
mindguards: some group members may adopt the role of protecting the group from info that goes against its decisions
Strategies to prevent groupthink
Strategies to prevent groupthink
Leaders must avoid exerting undue pressure for a particular decision outcome and concentrate on good decision processes
leaders should establish norms that encourage and even reward responsible dissent
outside experts should be brought in from time to time to challenge the groups views
Stimulating and managing controversy
Full-blown conflict or complete lack of controversy among group members can …
… can be used to …
- …
- Controversy promoted improves …
- to be effective the advocate musts …
Stimulating and managing controversy
Full-blown conflict or complete lack of controversy among group members can be harmful to good decision making
Devil’s advocate can be used to challenge existing plans/ strategies
- Point out weaknesses of a plan or strategy and state why it should not be adopted
- Controversy promoted improves decision quality
- to be effective the advocate musts present his or her views in an objective, unemotional way
